2 Below is the summarised draft balance sheet of Dexon, a publicly listed company, as at 31 March 2008.
£’000 £’000 £’000
Fixed assets
Property at valuation (land £20,000; buildings £165,000 (note (ii)) 185,000
Plant (note (ii)) 180,500
Investments at fair value through profit and loss at 1 April 2007 (note (iii)) 12,500
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378,000
Current assets
Stock 84,000
Debtors (note (iv)) 52,200
Bank 3,800
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140,000
Creditors: amounts falling due within one year (81,800)
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Net current assets 58,200
Provisions for liabilities
Deferred tax – at 1 April 2007 (note (v)) (19,200)
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Net assets 417,000
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Share capital and reserves
Ordinary shares of £1 each 250,000
Share premium 40,000
Revaluation reserve 18,000
Profit and loss account – at 1 April 2007 12,300
– for the year ended 31 March 2008 96,700 109,000 167,000
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417,000
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The following information is relevant:
(i) Dexon’s profit and loss account for the year includes £8 million in turnover from credit sales made on a ‘sale or
return’ basis. At 31 March 2008, customers who had not paid for the goods, had the right to return £2·6 million
of them. Dexon applied a mark up on cost of 30% on all these sales. In the past, Dexon’s customers have
sometimes returned goods under this type of agreement.
(ii) The fixed assets have not been depreciated for the year ended 31 March 2008.
Dexon has a policy of revaluing its land and buildings at the end of each accounting year. The values in the above
balance sheet are as at 1 April 2007 when the buildings had a remaining life of fifteen years. A qualified surveyor
has valued the land and buildings at 31 March 2008 at £180 million.
Plant is depreciated at 20% on the reducing balance basis.
(iii) The investments at fair value through profit and loss are held in a fund whose value changes directly in proportion
to a specified market index. At 1 April 2007 the relevant index was 1,200 and at 31 March 2008 it was 1,296.
(iv) In late March 2008 the directors of Dexon discovered a material fraud perpetrated by the company’s credit
controller that had been continuing for some time. Investigations revealed that a total of £4 million of the debtors
as shown in the balance sheet at 31 March 2008 had in fact been paid and the money had been stolen by the
credit controller. An analysis revealed that £1·5 million had been stolen in the year to 31 March 2007 with the
rest being stolen in the current year. Dexon is not insured for this loss and it cannot be recovered from the credit
controller, nor is it deductible for tax purposes.
(v) During the year the company’s timing differences increased by £10 million (capital allowances in excess of
carrying values) of which £6 million related to the revaluation of the property. Dexon has a firm commitment to
sell this property in the near future and has therefore been advised that a tax liability will arise on its sale. The
applicable corporation tax rate is 20%.
(vi) The above figures do not include the estimated provision for corporation tax on the profits for the year ended
31 March 2008. After allowing for any adjustments required in items (i) to (iv), the directors have estimated the
provision at £11·4 million (this is in addition to the deferred tax effects of item (v)).
(vii) On 1 September 2007 there was a fully subscribed rights issue of one new share for every four held at a price
of £1·20 each. The proceeds of the issue have been received and the issue of the shares has been correctly
accounted for in the above balance sheet.
(viii) In May 2007 a dividend of 4 pence per share was paid. In November 2007 (after the rights issue in item (vii)
above) a further dividend of 3 pence per share was paid. Both dividends have been correctly accounted for in
the above balance sheet.
Required:
Taking into account any adjustments required by items (i) to (viii) above
(a) Prepare a statement showing the recalculation of Dexon’s profit for the year ended 31 March 2008.
(8 marks)
(b) Prepare a statement of the movements in the share capital and reserves of Dexon for the year ended
31 March 2008. (8 marks)
(c) Redraft the balance sheet of Dexon as at 31 March 2008. (9 marks)
Note: notes to the financial statements are NOT required.
(25 marks) 2 (a) £’000 £’000
Profit for period per question 96,700
Dividends paid (w (i)) 15,500
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Draft profit for year ended 31 March 2008 112,200
Discovery of fraud (w (ii)) (2,500)
Goods on sale or return (w (iii)) (600)
Depreciation (w (iv)) – buildings (165,000/15 years) 11,000
– plant (180,500 x 20%) 36,100 (47,100)
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Increase in investments ((12,500 x 1,296/1,200) – 12,500) 1,000
Provision for corporation tax (11,400)
Increase in deferred tax (w (v)) (800)
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Recalculated profit for year ended 31 March 2008 50,800
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(b) Dexon – statement of the movement in share capital and reserves – Year ended 31 March 2008
Ordinary Share Revaluation Profit and Total
shares premium reserve loss account
£’000 £’000 £’000 £’000 £’000
At 1 April 2007 200,000 30,000 18,000 12,300 260,300
Prior period adjustment (w (ii)) (1,500) (1,500)
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Restated earnings at 1 April 2007 10,800
Revaluation of property (w (iv)) 4,800 4,800
Rights issue (see below) 50,000 10,000 60,000
Profit for period (from (a)) 50,800 50,800
Dividends paid (w (i)) (15,500) (15,500)
–––––––– ––––––– ––––––– –––––––– ––––––––
At 31 March 2008 250,000 40,000 22,800 46,100 358,900
–––––––– ––––––– ––––––– –––––––– ––––––––
Rights issue: 250 million shares in issue after a rights issue of one for four would mean that 50 million shares were issued
(250,000 x 1/5). As the issue price was £1·20, this would create £50 million of share capital and £10 million of share
premium. (c) Dexon – Balance sheet as at 31 March 2008:
Fixed assets £’000 £’000
Property (w (iv)) 180,000
Plant (180,500 – 36,100 depreciation see (a)) 144,400
Investments at fair value through profit and loss (12,500 + 1,000 see (a)) 13,500
––––––––
337,900
Current assets
Stock (84,000 + 2,000 (w (iii))) 86,000
Debtors (52,200 – 4,000 – 2,600 (w (ii) and (iii))) 45,600
Bank 3,800
––––––––
135,400
Creditors: amounts falling due within one year
(81,800 + 11,400 tax) (93,200)
––––––––
Net current assets 42,200
Provision for liabilities
Deferred tax (19,200 + 2,000 (w (v))) (21,200)
––––––––
358,900
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Share capital and reserves (from (b))
Ordinary shares of £1each 250,000
Share premium 40,000
Revaluation reserve 22,800
Profit and loss account 46,100 108,900
–––––––– ––––––––
358,900
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Workings (figures in brackets in £’000)
(i) Dividends paid
The dividend in May 2007 would be £8 million (200 million shares at 4 pence) and in November 2007 would be
£7·5 million (250 million shares x 3 pence). Total dividends would therefore have been £15·5 million.
(ii) The discovery of the fraud means that £4 million should be written off debtors. £1·5 million is debited to the profit and
loss account reserve as a prior period adjustment (in the statement of recognised gains and losses and shown here in
the statement of the movements in share capital and reserves above) and £2·5 is written off in the profit and loss
account for the year ended 31 March 2008.
(iii) Goods on sale or return
The sales over which customers still have the right of return should not be included in Dexon’s turnover. The reversing
effect is to reduce the relevant debtors by £2·6 million, increase stock by £2 million (the cost of the goods (2,600 x
100/130)) and reduce the profit and loss account for the year by the profit of £600,000.
(iv) Property
The carrying amount of the property (after the year’s depreciation) is £174 million (185,000 – 11,000). A valuation of
£180 million would create a revaluation surplus of £6 million of which £1·2 million (6,000 x 20%) would be
transferred to deferred tax as the liability is likely to arise in the near future.
(v) Deferred tax
An increase in the timing differences of £10 million would create a transfer (credit) to deferred tax of £2 million (10,000
x 20%). Of this £1·2 million relates to the revaluation of the property and is debited to the revaluation reserve. The
balance, £800,000, is charged to the profit and loss account. |
发表于 2008-10-11 15:34
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